Re: New Bias Charges Against FICO Scores ..... unfair to minorities

I'm white, but I work in education in a school entirely composed of African American and Hispanic students from a disadvantaged socio-economic background. From what I've learned, financial illiteracy is a serious community problem for these students. Because their families make so little income, they have learned to shun banks because they can't maintain the minimum balances or meet the requirements for free checking. They would constantly overdraw their accounts by accident and have to pay massive fees each time. Instead, they rely on prepaid debit cards and an entire industry exists to prey on them. In particular, Russell Simmons' "Rushcards" exploit them with huge fees for every possible action they can use it for.

Since their parents and grandparents have all dealt with the same issues as the students, they have no role models for good personal finance. They pay cash for everything, because nobody teaches them about handling credit. They end up carrying large amounts of cash or hiding large amounts of cash in their homes and they face the constant threat of someone stealing their money. For protection, they join gangs and then they end up becoming aggressors to steal cash from their peers.

In school, math classes focus on advanced engineering-type math that has very little practical use, because this is what the state tests for. There are no real-world life skills classes, because all education today is focused on passing state-mandated exams, which determine schools' funding. There is no place in school to teach students like mine how to handle credit and checking accounts so they can escape the endless cycle of deprivation and violence.

Fixing the credit of disadvantaged minorities is a difficult task, because it would require changing an entire culture of poverty in the inner-city.

Great post, Lithium. If the CRA had any involvement in the financial meltdown at all, it was that it taught lenders that some traditionally sub-prime categories of borrowers weren't as high risk as previously thought, and there was a market for them. The problem is, lenders took this and ran with it, and expanded to folks who had no business buying a home, or no business buying a home at the price and the conditions of their loan. So, a disproportionate number of minorities were given unsustainable mortgages. No worry for the lender, they could sell the mortgage immediately, have it bundled up and securitized and pasted with a triple A rating.

If the federal government does indeed do something, it will likely be along the lines of more credit education for minority and lower-income consumers.

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